Growing up, my father and brother would argue over which business function was more important: Engineering (in my brother’s opinion) or Finance (my Dad’s). This proved to make my personal career choice hard – designing and building cool stuff or providing the resources to do it. I still wish I’d picked up more technical skills – even now, I’m trying to learn AngularJS with my son – but I ended up as a bean counter. And whilst I now believe Sales is actually the most important function in a business, I get why finance and accounting are essential for success. Whilst engineering may be the brain, and obviously sales the mouth, finance and accounting are the eyes and ears. The first step in any decision process is to Observe: without awareness of where we are, it is impossible to react. And so the key role of finance is to collect data about our current situation to help refine direction, present progress, and thereby secure resources to continue and grow.
So the life of an Accountant is one of deadlines – frantically collecting data inputs from all aspects of an organisation’s activities to help form a clear picture of where it’s at. To compare progress to goals. And to inspire the market and financiers to keep their faith, and provide the essential financial and other resources the organisation requires to prosper and grow.
Timely and reliable Income Statements, Balance Sheets and Cashflow Statements form the basis of investment decisions and resource allocations. Those organisations that can present this critical insight earlier can take faster action and stay the course. The pain of year-end, quarter-end and month-end reporting are justified by a continued supply of funds, better business decisions and sustainable competitive advantage.
Historically, the biggest innovation for accountants was the introduction of Enterprise Resource Planning (ERP) software. No longer being required to cobble together transaction outcomes from various sources to update the ‘General Ledger’, core business transactions were instantly reflected in ‘the books’. The implementation of ERP’s like SAP in the 90’s was a short-term boon for Accountants. It proved a valuable opportunity for the finance function to move from a transactional processing to an analytical role. But some transactions remained – like the period-end journal adjustments.
‘Manual’ General Ledger adjustments are simply those final accounting entries that are not automatically generated from sales, procurement, production or other integrated core business transactions. These fall within the following categories:
- New Information: manual journal preparation due to a lack of transactional system integration such as the performance of a foreign subsidiary, joint venture or non-integrated process (e.g. payroll);
- Internal Accounting: allocation of costs between entities for equitable performance management;
- Generally Accepted Accounting Standards compliance: adjusting the integrated transaction through accruals and deferrals to reflect financial statements on a consistent standardised basis;
- Group Accounting and Consolidation: eliminating internal transactions to correctly reflect the results of the group as a reporting entity;
- Regulatory Compliance and Taxation: taking up the adjustments and transactions related to local regulatory and tax regimes; and
- Corrections and adjustments: correcting reported results as a result of account reconciliations and reviews.
It is accepted ERP wisdom that transactions are best recorded as close to the action as possible. Sales orders by the sales person, for example. And in the case of period-end journal adjustments, by the subsidiaries, by the site accountants, by the project controllers, by the taxation department. By whomever is best able to determine, calculate and process the financial posting should do so. And thereafter, in order to ensure transactional accuracy, validity, completeness and compliance, an effective process of transaction validation, review and approval is required.
The obvious benefits of workflow-enabled journal approvals include:
- Faster approval by the responsible senior accountants for more timely reporting and less month-end pain and overtime;
- Greater productivity by enabling delegation of journal preparation whilst retaining senior accountant responsibility for review and approval;
- Improved transactional accuracy for more reliable reporting and less time processing even more corrections and adjustments.
However, the real benefit is not just simply on cost-saving and productivity, but on real business effectiveness. Faster journal approval can reduce the financial close cycle, providing executives and investors with better operational visibility to take more timely corrective actions and reduce the risk premium placed by investors on an organisation’s results. Even bad news is good news with investors, as low-confidence reporting results in a higher risk weighting in the highly competitive market for funding. All else being equal, more timely and reliable financial reporting helps organisations attract lower cost funding to generate even greater returns and thus set in place a virtuous circle where the good get even better.
So how can finance departments accelerate their journal approval process? The one tool all finance professionals take with them throughout their careers is Excel. So it is not surprising that most financial accountants make use of Excel tools such as GL Wand by Excel4Apps for reporting, and GLSU by ZOption for General Ledger Spreadsheet Uploading. Today, another essential tool of all executives is their smart phone. OneList Approvals provides an effective, user-friendly mechanism for journal approval both at one’s desk and on the road. In addition to providing senior accountants with immediately visibility of proposed transactions, all journal working and supporting documentation is provided. Accessible from within the convenience of Outlook as a dedicated task panel (and not lost in email clutter) or via a phone, OneList Approvals for journal review and approval is available and actionable everywhere.
So, whilst not an engineer, I am happy that my Chartered Accounting qualification gave me the confidence to start a business where, together with talented software engineers and an awesome sales team, we are able to make an impact. We have as our vision the provision of tools to help organisations accelerate process outcomes. I am immensely proud of the contribution we at IQX Business Solutions are making to improve the lives of accountants everywhere, helping organisations win the competition for funding and accelerating decision making by informed executives to help organisations outperform their peers.